PAAMCO and KKR Prisma To Merge, Create $34B FoF And Liquid Alts Company

Feb 7 2017 | 12:08am ET

Fund of hedge funds manager PAAMCO has agreed to merge with KKR’s Prisma hedge fund allocation unit in a strategic transaction that creates a $30 billion firm with significant presence in the fund-of-funds and liquid alternative sectors. 

Under the terms of the agreement, the entire businesses of both PAAMCO and KKR Prisma will be contributed to a newly formed company named PAAMCO Prisma. The new business will operate independently, although KKR will retain a nearly 40% stake, according to a joint statement. Employees will own the remaining 60%.

The two brands will continue to exist side-by-side, the statement said, with core investment and client teams remaining in place. PAAMCO founder Jane Buchan and KKR Prisma founder Girish Reddy will co-lead the new venture.

Subject to customary closing conditions and regulatory approvals, the deal is expected to close in the second quarter of this year. Financial terms were not disclosed. 

KKR was advised by Simpson Thacher & Bartlett LLP, and PAAMCO was advised by Moelis & Company LLC and K&L Gates LLP, the statement said. 

Founded in March 2000, PAAMCO is a private institutional investment firm with $24 billion of alternative asset AUM, while KKR Prisma has approximately $10 billion in AUM and constructs and manages customized hedge fund portfolios and other liquid alternative investments.

“This transformative step will enable us to provide added scale benefits, wider investment options and faster innovation to all of our investors,” said Buchan in the statement. “Organizationally, we are excited by how well Prisma’s investment franchise complements our own, and by the possibilities that KKR brings.”

“Joining forces with PAAMCO will enable us to better serve our clients’ evolving investment requirements,” added Reddy. “I believe greater scale, flexibility, and additional resources will enhance our ability to generate strong investment performance and to build and service bespoke solutions for our clients. 

KKR acquired Prisma, which was founded in 2004 by Reddy and two of his former Goldman Sachs colleagues, Thomas Healey and Gavyn Davies, in 2012 as the company sought to expand beyond private equity and into hedge funds.

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